David 0:00

Ancillary benefits. Even the name implies that they're not a big deal and they're not really important. Ansillary, they're ancillary, they're not name. But there's some stuff being done to change that, and it could have a huge impact on your process. What are those things? We'll find out on this episode of Shift Shapers.

SPEAKER_00 0:22

This is the Shift Shapers Podcast, connecting benefits advisors with thought leaders and entrepreneurs who are shaping the shifts in the industry. And now, here's your host, David Salt Smith.

David 0:35

And we have asked Kevin Curran, who's the founding partner at Salt Margin. He's one of the professionals who's bringing new prominence to these ancillary benefits. Thank you, Kevin, for being here. We appreciate helping to teach us what's cooking.

SPEAKER_03 0:48

Yeah, absolutely. Thanks for having me. I appreciate it.

David 0:50

My pleasure. So quickly tell us about your journey. Nobody ever starts out in the insurance business where they end up. So tell us about how you got to be doing what you're doing today.

SPEAKER_03 0:58

Well, I fantastically started as a catastrophic failure. So for my first three years in the industry, I worked for an insurance company and I was in the bottom 25%. Believe it or not, I got worse each year, year over year for three years. I then was gifted the opportunity to sit down with a small business of about 30 employees. There were four owners of this organization, and they started roundtabling their problems that they had. So we I came in to discuss their life insurance plan. It was $50,000 of coverage. Their LTD program was 60% to $5,000 and had a lot of the normal restrictions that you would see in it. And the lead owner, who was 68 years old, said, I spend more for my individual disability than I do for all of this coverage combined. And he's like, Should I still have that coverage? I was like, I don't know, but why don't you get the bill and bring in the policy? We'll have a look at it. And the next gentleman in the room said, I have a heart condition, haven't really had a problem in the last five years, but I can't be covered under business continuity plans. I can't get individual insurance. And this is everything I have in the world. Is it any good? And I was honest with him. I said, no, not particularly. And so we went around the room and by the end of it, you know, we ended up writing completely different policies. They actually ended up spending more than five times what I had originally been coming in to propose. But we solved business continuity issues. We got rid of overinsurance in certain areas, but we were tripling, quadrupling maximums and really getting rid of all of the elements that were within the policy that would create a situation where it wouldn't pay as somebody would sort of commonsensically intended. They shook my hand, like really thanking me, and I had to leave asking the question, like, what just happened here? You know, it wasn't about rate. I helped people solve a series of problems that really they didn't even know they had or they didn't know were addressable. And on the back end of it, I started down a path of, okay, let's answer this question. I went from a bottom 25% to a you know top 10% rep in the company in the years thereafter. And then I found the fascination and said, This, I need to have more than one product. I need to be able to play with the full sort of kaleidoscope of options that are available in the marketplace. And so I started Salt Margin at that point to go out there and our mission is to design the new standard. And so that's what we're trying to do is bring a different level of rigor other than spreadsheets to the marketplace.

David 3:31

Awesome. So let's level set. What's the traditional way that that ancillary, or as my buddy and yours, Mr. Silverman calls them, enhanced benefits? What's the traditional way that those are marketed and what's wrong with that?

SPEAKER_03 3:44

Typically, it's driven by either a medical increase or renewal increase, or you just got the BOR for a client. And typically BORs don't come in in perfect time six months prior to do lots of planning. The they're not happy in the last moment with their current advisor, and so they make a switch. And I think a lot of advisors, when they get that big medical increase, that big renewal, or that new client, their thought on the ancillary is quick, throw this out the market and see if we can save another 10, 15% on the enforced plans and look like heroes. What ends up happening in that result is nothing ever gets analyzed as to whether the current plans are the correct plans. And it leads to situations where when I first uh started doing this, I had a CEO CFO exchange that still like just rings in my ears, and the CEO said, When's the last time we looked at our benefits like this? And the CFO deadpan back, I've been here 19 years, so it's been at least 19 years. I shared that same story with a bank recently, and the CFO of the bank said, I've been here 26 years, and it's been at least 26 years. So the state of the industry is recycling the enforced plan for lower rates because frankly, the priority is not ancillary in most agencies and in most clients' minds, but you'll be darn sure that if that policy fails them at claim time, that it's going to be egg on your face as an advisor.

David 5:09

Yeah, no question. No question. I mean, it's interesting because on the core benefits, a lot of people who, you know, the nomenclature changes, right? So it went from agent to broker to advisor. Are you seeing a similar shift in the ancillary side of the benefit to being more of a consultant?

SPEAKER_03 5:25

No. But plainly spoken, everybody is tripling down on their resources and learning when it comes to medical prescription drug. They have to now dedicate a good portion of their brain to compliance, technology, ben admin, EDI feed information. And so, you know, this really is kind of the step cousin whatever that gets put out in a field and is, you know, we're not in danger of losing anything because everybody is doing the same thing. It's created a lot of opportunity for the very small pool of advisors that are able to consult in it. Because the fact of the matter is, with all the consolidation that's gone on in the industry, there's very little weak competition left. And so if there's very little weak competition left, if your business plan is to go out and beat weak competition, then you have a failing business plan. Like you are not going to make it in this business. So at this point, we're at a state of the industry where if you can't go against good to very good competition and beat them, then you're you're probably in trouble as an advisor, as an agency. And so the problem is when you're going against good competition, they are studied when it comes to self-funded medical. They have resources for technology, ben admin, compliance. They're addressing all these things. And what was, you know, avant-garde and new in that area is kind of becoming table stakes. And so what you find is those things actually get you, I see it a lot, to the finish line. And the client is now asking the question, which way do we go? And typically it's the company that is a little bit more comprehensive in the holistic recommendations that they make. And, you know, we talk a lot about life and disability insurance, but it's very quickly coming into companies want advice on their in-house paid and unpaid leave programs. They know they need to be better thinking about and planning for statutory programs that are either in place or coming. And, you know, when you get into the multi-hundred, multi-thousand life space, do they need to be doing it in-house or should they be outsourcing it? And so the companies that can go and do all the things that are required on the medical side, but then extend into these, you know, they're not the priority, but they're somewhere on people's list at almost every single organization. So by speaking to them, you know, the reason that we have that we came up with the name salt margin is the idea that a grain of salt can tip the scale. And the notion is that it you don't win with the fastball all that often anymore. You don't catch people asleep at the wheel often enough for that to be a valuable business plan. So what you have to be able to do is beat them in the margins, beat them in the wings, and beat them in the little things that you do that are superior.

David 8:16

So one of the things that you mentioned that I thought was fascinating is coordinating with leave programs. Yes, sir. What does that mean and how do you do that? Can you give us an example?

SPEAKER_03 8:24

Absolutely. You know, very, very basically. I mean, when I I first would go back to my carrier days, how many plans had a one uh first-day elimination period for accidents and eighth day for sickness? It's probably still about 30, 35% of STD programs have that. And then probably another good portion are eight days for both. So you're probably looking at somewhere in the 50 to 60 percent range of programs, have either a 1.8 or an 8.8 elimination period. I mean, a real simple question, I and I ask advisors this all the time. Give me a copy of the client's PTO program. Nobody has it. How can you properly set elimination periods for short-term disability if you don't know what their leave programs are? So a lot of times it's double insured. So moving from a 1.8 to an 8.8 is about a 3 to 5% savings, but a move to a 15-15 is gonna be, roughly speaking, a 15, 18, 20% savings. And even from an 8.8 to there is gonna be a 12 to 15% savings. So it's a sizable jump for short-term disability. You get into some of these, I'll call them institutional type companies, you know, banks. You'll see it a lot in the public sector, but they have huge sick leave banks that you can roll over, and people have hundreds of hours of sick pay. And they're like, but we still need STD because some people have used their sick pay, and we have new employees that need access to STD. And so what you can actually do is you can do a requirement that an employee fully draws down their uh in-house sick leave bank, so it's called sick leave bank exhaustion, prior to the STD benefits starting. And so what you do is you add to the census all the hours that somebody has accumulated under that bucket and the insurance company underwrites for it. I've seen an 80 cent rate drop to 14 cents based on a leave bank being shared. And the last one I would give is you know, business continuity planning amongst owners. They've made a decision that if one of us becomes disabled, we're gonna continue one another's earnings, or maybe just the business is set up that the earnings continues. And I worked with a uh over 200 employee agency, and there was 19 owners, and I was talking with like the lead shareholder, and she said, Well, what would you do if we were to work together? Like, how could you actually help us? I'm like, Well, you have 19 partners. Would any of you lose a dollar for the first 90 days? No. Are all of you covered for STD? Yes. Do all of you make enough that you cap out the program? Yes. Are you older than the average age of your population as the 19 shareholders? Yes. Well, removing those 19 people that are just shy of 10% of your overall population will probably save you 20% because here's the headline. They're not eligible for STD. They're never going to suffer the earnings loss during that period. And by the way, if your LTD program is not set up to have no earnings loss requirement to start the elimination period, you're actually going to have these employees being out getting the full 180 days of replacement that you have for them. They're going to say, okay, well, LTD starts. And no, it doesn't start. You're now going to be starting the elimination period under it. So you would need something referred to as a or definition of disability in order to solve for that. So there are lots of nuanced ways that you can just show people that you're awake and you're thinking about them and you're really, you know, everybody wants to feel seen. And so that I think that's part of this process is you're understanding really who they are and you're tailoring to them.

David 12:10

Well, you're also opening an opportunity to have a really interesting discussion about buy-sell agreements. 100%. And because, you know, our rich uncle in Washington frowns on continuing to pay employees who aren't actively at work. Correct. Especially large dollar employees, especially over a long period of time. But it's it's interesting as you were describing these little what most people would think are nuancedy things that you look for and your firm looks for that other folks don't. You know, I've said a number of times on this podcast that the successful advisor and the successful agency going forward aren't going to be the people who do what their competitors are doing. They're going to be the people who are doing what their competitors aren't doing, but should be. And this sounds like it falls you know right into that bucket. And one of the things that DI is is my passion, but it's not everybody's. One of the things that you guys look at is reverse discrimination. And I don't know that that's a term today that's familiar to a lot of advisors. What is that and how do you overcome it?

SPEAKER_03 13:06

Sure. I mean, well, first off, we'll define what it is. And so you make more money than the plan maximum allows for the most part. So let's say you a very simple illustration is a one times earnings life insurance plan, but it's capped at $200,000. Sat with the CFO and told him that it's capped at $200,000. He's like, I literally never knew that I did not legitimately have one times my earnings. Oh, and by the way, sir, you're 65.1 years old, so you're not getting $200,000, you're getting $130,000 because there's a 35% age reduction starting at age 65. And so what we would have to do is we would have to look to see, okay, if the highest earner in the group, let's say, is $300,000, we would be lifting that threshold to one times to $300. And there's also something that we refer to as policy ageism. So there's certain ages where there's going to be reductions in benefit. You know, for a long-term disability, there was the age 65 maximum duration that was the standard for a long time. Now the standard is more age 67. But I can tell you, we write a lot of to age 70 group contracts for professional firms where you have people in their late 50s to mid-60s that are going to be working until age 70. So there's a lot of different ways to measure discrimination. It happens a lot on STD, on LTD. And so the creative element, you know, I think what people have wrong, and I think sometimes is an error on the individual disability planner's end of the world sometimes, is the correct answer, isn't just turning every dial to 11 and saying, here's a 300% uh premium increase. Like let's all pat ourselves on the back. We did a good job here. What is good is going in and finding where you can save some dollars and redeploy them. That's why that work on the STD benefits is so important because it could fund the life insurance being lifted. It could fund the LTD maximum going from 5,000 to 10 or 15,000. There's some other ways of playing with taxation that we like to use that can save dollars but improve the plan at the same time. We're big proponents of, we also refer to it as diagnosis discrimination. So we live in a world of mental health parity and healthcare. There is not mental health parity or substance abuse parity in disability insurance. Almost every contract on the group end of the spectrum will limit those benefits to 24 months maximum duration unless you're inpatient, and not all policies even cover the inpatient element. So, you know, there's musculoskeletal, connective tissue, and subjective claims. If you look at those claims together that could be potentially limiting the maximum benefit duration to 24 months, they're 40% of L to D claims. And then you add in the most common definition of disability, which is the 24-month own occupation definition of disability. And to make it really simple, what it means is that after two years, the measurement changes for are you disabled or are you not disabled. And you're gonna see somewhere between 30 and 40% of claims closed by just that provision at that mark. So you say an employee's gonna go to the doctor, doctor's gonna say, you're just as disabled as you were last month. They're gonna go to the insurance company and they're gonna go, yeah, but unfortunately, there's an issue. Your policy changes here at 24 months and your claims closing. And that to me, the issue is not necessarily the clients have made that decision. The issue is that they've never actively made that decision for themselves. They've never been challenged on the issue, they've never been educated around the probability that these limitations are going to bite them, they've never had it put in a numerical number for them to observe to say, after taxes, limited to 24 months, this $250,000 a year individual is going to get $150,000 of disability insurance for the rest of their life. And if they had gone out on a full duration claim and those limitations had not been there, it was going to be $3.2 million of disability replacement. So, you know, there's ways of illustrating these things. If you think about how any one of us goes and sits down with a financial planner, a financial planner has a couple of key pieces of data. They have your earnings, they have how long you intend to work, they have your savings, and they're going to model out for you the likelihood of certain things if you do X, Y, or Z. We have earnings, we have the future work, we have the propensity for the policy to actually pay or not to pay. And so we have the ability to do the exact same modeling that a financial planner would do. And that's how we kind of see the consultation that we host with somebody is we're not here to tell you what's right and what's wrong. We want you to be in an empowered position to make whatever your decision is, but you deserve to know what all the options are, how they price, so that you can make your best decision for you and your team.

David 18:12

Yeah, there's no question that with all of this stuff, the devil is in the details. And I appreciate you taking some time from your day to share some of those details and some of those things that advisors ought to start thinking about because ancillary benefits can not only be lucrative, they can be a wonderful benefit for the clients. Kevin Curran, founder and partner at Salt Margin. Kevin, thanks so much. We appreciate you being here.

SPEAKER_03 18:34

Thank you, David. Appreciate it.

Announcer 18:36

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